Pension funds can invest for impact without sacrificing returns or fiduciary duty, a research paper released by Pensions for Purpose Nov. 28 argued.
Pensions for Purpose works with asset managers, pension funds and advisers to encourage impact investment and six asset managers co-sponsored the research.
The paper, Impact investment performance – a UK asset owner and investment consultant perspective, collated data to "dispel the myth investing with an intentional impact goal alongside financial return is detrimental to performance," it said. The research covered listed equity, bonds, private equity, real estate and infrastructure funds from 17 asset managers handling £18.6 billion ($23.2 billion) in impact assets.
The paper also includes interviews with six U.K. pension funds and four investment consultants to supplement the performance data findings.
"The cumulative investment performance results are consistent with academic research, which suggests there is no reason why impact funds should not achieve competitive risk-adjusted returns compared to conventional funds," the paper said.
Within impact investments, predominant themes were renewable energy, energy efficiency and health, with biodiversity emerging as an important area of interest as U.K. pension funds move beyond traditional environmental concerns, the paper said.
In private markets, impact investments particularly in real estate and private equity represent a substantial portion of pension funds' allocations. Private market investments represent 47.3% of the pension funds' impact strategies, while listed assets comprise 52.7% of impact solutions offered by managers to U.K. pension fund investors.
"The findings validate the compatibility of impact investing with financial performance goals which could have far-reaching consequences on future institutional investments," Karen Shackleton, chair and founder of Pension for Purpose, said in a release on the paper.